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Exhibit 2.1
Agreement and Plan of Merger
dated as of
December 14, 2010
by and between
Mondial Ventures, Inc.,
a Nevada corporation
and
Legacy Athletic Apparel, LLC,
a Virginia limited liability company
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of December
14, 2010, is entered into by Mondial Ventures, Inc, a Nevada corporation
("Parent"), and Legacy Athletic Apparel, LLC, a Virginia limited liability
company (the "Company"). In the event the parties determine that the Company
shall reorganize as an association taxable as a corporation for tax purposes to
effect the transactions contemplated in this Agreement, the term "Company" as
used in this agreement shall include the Company as so reorganized.
Recitals
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A. The Company has developed and is developing a line of products centered
on its intellectual property for "Alltimate Ball" and the "AB" logo. The
products contemplated fall within Class 25 under the categories of the United
States Patent and Trademark Office (the "Opportunity").
B. The Boards of Directors of Parent and the manager and member of the
Company have each determined that it is advisable and in the best interests of
their respective stockholders or members, as the case may be, to consummate, and
have approved, the business combination transaction in which the Company would
merge with Parent (the "Merger"). The parties may structure the transaction as a
tax-free transaction in accordance with the United States Internal Revenue Code
of 1986, as amended (the "Code") and, to that end, the parties contemplate that
the Company may reorganize as an association taxable as a corporation to comply
with the tax-free reorganization requirements of the Code (including Section
368(a)(1)(A) or (B) thereof).
C. Parent and the Company desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
D. Parent and Xxxxxx Xxxxx, managing member of the Company, have
previously entered into a memorandum of understanding dated June 14, 2010 (the
"MOU") which agreement expired on July 7, 2010. This Agreement shall replace and
supersede the MOU and any other prior agreement to the extent each has not
otherwise terminated in accordance with its terms.
Agreement
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Now, Therefore, in consideration of the mutual covenants and agreements in
this Agreement, and certain other good and valuable consideration, the receipt
and sufficiency of which are acknowledged, the parties covenant and agree as
follows:
Section 1. The Merger.
1.1 The Merger. At the Effective Time (as defined in Section 1.2),
upon the terms and subject to the conditions of this Agreement, the Company
shall be merged into Parent in accordance with, as applicable, the Virginia
Limited Liability Company Act ("Virginia Act"), and Chapter 92A of the Nevada
Revised Statutes (the "State Reorganization Statutes"). The surviving entity in
the Merger (the "Surviving Corporation") will be the Parent. Parent and the
Company, regardless of whether they are corporations or limited liability
companies, are sometimes referred to herein as the "Constituent Corporations."
As a result of the Merger, the outstanding shares of capital stock or other
interests of the Constituent Corporations shall be converted or cancelled in the
manner provided in Section 2.
1.2 Effective Time. At the Closing (as defined in Section 1.3),
articles or certificates of merger (individually and collectively, the
"Certificate of Merger") shall be duly prepared and executed by the Surviving
Corporation and thereafter delivered to the Secretary of State of the State of
Nevada (the "Nevada Secretary of State") for filing, as provided in Section
92A.200 of the Nevada Revised Statutes (the "NRS"), and to the State Corporation
Commission of Virginia (the "Virginia Commission") for filing, as provided in
Section 13.1-1072 of the Virginia Act, on, or as soon as practicable after, the
Closing Date (as defined in Section 1.3). The Merger shall become effective at
the time of the filing of the Certificate of Merger with the Nevada Secretary of
State (the date and time of filing being the "Effective Time"), provided that
the Certificate of Merger is filed concurrently or promptly thereafter with the
Virginia Commission.
1.3 Closing. The closing of the Merger (the "Closing") will take
place at the offices of counsel to the Company, Case Xxxxxxxx & Xxxxxx, LLP, or
at any other place as the parties may agree, on a date and at a time to be
specified by the parties, which shall in no event be later than 10:00 a.m.,
local time, on the first business day following satisfaction of the conditions
set forth in Section 5.2, provided that the other closing conditions set forth
in Sections 5 and 6 have been satisfied or, if permissible, waived in accordance
with this Agreement (the "Closing Date"). At the Closing there shall be
delivered to Parent and the Company the certificates and other documents and
instruments required to be delivered under Sections 5 and 6.
1.4 Governing Documents of the Surviving Corporation. At the
Effective Time, (i) the Articles of Incorporation, as amended and in effect at
the date of this Agreement, of Parent shall be the Articles of Incorporation of
the Surviving Corporation until amended as provided by law and the Articles of
Incorporation, and (ii) the Bylaws of Parent in effect at the date of this
Agreement shall be the Bylaws of the Surviving Corporation until amended as
provided by law, by the Articles of Incorporation of the Surviving Corporation
and the Bylaws themselves.
1.5 Directors and Officers of the Surviving Corporation. From and
after the Effective Time, and subject to any necessary compliance with Section
14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
the persons identified on Exhibit A shall be the directors and officers,
respectively, of the Surviving Corporation until their successors shall have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's Articles
of Incorporation, its Bylaws and any contractual arrangement between any of
these persons and the Company.
1.6 Effects of the Merger. Subject to the foregoing, the effects of
the Merger shall be as provided in the applicable provisions of the State
Reorganization Statutes.
1.7 Further Assurances. Each party will execute all further
documents and instruments and take all further actions as may reasonably be
requested by one or more of the others to consummate the Merger, to vest the
Surviving Corporation with full title to all assets, properties, rights,
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approvals, immunities and franchises of either of the Constituent Corporations
or to effect the other purposes of this Agreement.
Section 2. Conversion of Membership Interests in the Merger.
2.1 Conversion of Equity. At the Effective Time, except as provided
in Section 8.3 below and then as soon as practicable after the Effective Time,
by virtue of the Merger and without any action on the part of the holder
thereof:
(a) Exchange Ratio for Membership Interests in the Company. Each
issued and outstanding one percent (1%) membership percentage interest in the
Company (each a "Company Membership Share") shall be converted into the right to
receive Five Hundred Ten Thousand (510,000) (the "Conversion Number") fully paid
and non-assessable shares of common stock, par value $.001 per share, of Parent
("Parent Common Stock"), subject to adjustment in accordance with the next
sentence. If prior to the Effective Time, Parent shall (i) have effected a stock
split of Parent Common Stock, the Conversion Number shall be multiplied by a
fraction, the numerator of which is the number of shares into which each
pre-stock split share of Parent Common Stock is split pursuant to the stock
split and the denominator of which is one, and the resulting product shall be
the applicable Conversion Number, subject to further adjustment in accordance
with this sentence or (ii) pay a dividend in, subdivide, combine into a smaller
number of shares or issue by reclassification of its shares, any shares of
Parent Common Stock, the Conversion Number shall be multiplied by a fraction,
the numerator of which shall be the number of shares of Parent Common Stock
outstanding immediately after, and the denominator of which shall be the number
of these shares outstanding immediately before, the occurrence of the triggering
event, and the resulting product shall be the Conversion Number, subject to
further adjustment in accordance with this sentence. All Company Membership
Shares shall no longer be outstanding and shall automatically be canceled and
retired, and each holder of a certificate representing any of the Company
Membership Shares shall cease to have any rights, except the right to receive
the shares of Parent Common Stock to be issued in consideration for the Company
Membership Shares, upon the surrender of any certificate in accordance with
Section 2.2, without interest.
(b) Cancellation of Treasury Securities and Securities Owned by
Parent and Subsidiaries. All Company Membership Shares that are owned by the
Company as treasury securities and any Company Membership Shares owned by the
Parent or any other wholly-owned Subsidiary (as hereinafter defined) of Parent
or the Company shall be canceled and retired and shall cease to exist and no
stock of Parent or other consideration shall be delivered in exchange for them.
As used in this Agreement, "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which more than fifty percent (50%) of either the equity interests in, or the
voting control of, the corporation or other organization is, directly or
indirectly through Subsidiaries or otherwise, beneficially owned by that party.
(c) Convertible Securities. Subject to the terms and conditions of
any stock plan (the "Company Option Plan") or any outstanding convertible
security of the Company (the "Company Convertible Securities") and the option
agreements executed pursuant thereto, the Company Option Plan and each option to
purchase Company Membership Shares granted thereunder and each Company
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Convertible Security that is outstanding at the Effective Time shall be assumed
by Parent and continued in accordance with their respective terms and each such
option and Company Convertible Security shall become a right to purchase a
number of shares of Parent Common Stock equal to the Conversion Number
multiplied by the number of Company Membership Shares subject to such option or
Company Convertible Security immediately prior to the Effective Time, as more
fully described in Section 8.7.
2.2 Exchange of Certificates.
(a) Exchange Agent. On the Closing Date, Parent shall make available
to the person designated by the Company and reasonably acceptable to Parent (the
"Exchange Agent"), certificates representing the number of duly authorized
shares of Parent Common Stock issuable in connection with the Merger (the
"Exchange Fund"), to be distributed to the holders of Company Membership Shares
in accordance with this Section. The Exchange Agent shall agree to hold the
Exchange Fund for delivery as contemplated by this Section and upon additional
terms as may be agreed upon by the Exchange Agent, the Company and Parent.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time and subject to the surrender provisions of this Section 2.2(b),
the Exchange Agent shall deliver to each holder of record of Company Membership
Shares whose Company Membership Shares are converted pursuant to Section 2.1(a)
, a certificate or certificates representing that number of shares of Parent
Common Stock that the holder has the right to receive pursuant to the provisions
of this Section 2. The share certificates representing the Parent Common Stock
will be issued with an appropriate restrictive legend preventing transfer unless
registered or exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"). Prior to this delivery, a Holder will first
deliver to the Exchange Agent an affidavit of ownership of Company Membership
Shares; the affidavit shall constitute tender of the Company Membership Shares.
The Company Membership Shares so tendered shall be canceled. In no event shall
the holder of any Company Membership Shares be entitled to receive interest on
any property to be received in the Merger.
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date on or after the Effective Time shall be
paid to the holder of any untendered Company Membership Share, until the holder
of record of the untendered Company Membership Share shall tender in accordance
with this Section. Subject to the effect of applicable laws, following tender of
any of these Company Membership Share, there shall be paid to the record holder
of the certificates representing whole shares (and only whole shares) of Parent
Common Stock issued in exchange therefor, without interest, (i) at the time of
surrender, the amount of dividends or other distributions, if any, with a record
date on or after the Effective Time that theretofore became payable, but which
were not paid by reason of the immediately preceding sentence, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date on or after the Effective Time but prior to surrender and a payment
date subsequent to surrender payable.
(d) No Further Ownership Rights in Company Membership Shares. All
shares of Parent Common Stock issued upon the surrender for exchange of Company
Membership Shares (including any cash paid pursuant to Section 2.02(e) below)
shall be deemed to have been issued at the Effective Time in full satisfaction
of all rights pertaining to the Company Membership Shares represented thereby,
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subject, however, to the Surviving Corporation's obligation to pay any dividends
that may have been declared by the Company on the Company Membership Shares in
accordance with the terms of this Agreement and that remain unpaid at the
Effective Time. From and after the Effective Time, the Company Membership Share
books of the Company shall be closed and there shall be no further registration
of transfers on the books of the Surviving Corporation of the Company Membership
Shares that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, untendered Company Membership Shares are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Section.
(e) Fractional Shares. No fractional shares will be issued. In lieu
of the issuance of fractional shares of Parent Common Stock issuable as a result
of the Merger, Parent shall issue a whole share of Parent Common Stock upon the
surrender for exchange of Company Membership Shares.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Company Membership Shares for
three (3) months after the Effective Time shall be delivered to the Parent, upon
demand, and any holders of untendered Company Membership Shares who have not
complied with this Section 2 shall thereafter look only to the Parent (subject
to abandoned property, escheat and other similar laws) as general creditors for
payment of their claim for Parent Common Stock, any cash in lieu of fractional
shares of Parent Common Stock and any dividends or distributions with respect to
whole shares of Parent Common Stock. Parent shall not be liable to any holder of
untendered Company Membership Share for shares of Parent Common Stock, any
dividends or distributions, or cash payable in respect of fractional share
interests delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
Section 3. Representations, Warranties and Covenants of the Company. The
Company represents and warrants to, and covenants with, Parent as follows:
3.1 Corporate Existence, Power and Authority. The Company is a
limited liability company duly organized, validly existing and in good standing
under the law of the Commonwealth of Virginia and has all requisite corporate or
limited liability company, as the case may be, power and authority to conduct
the Opportunity as now being conducted, and to own, lease or otherwise hold its
properties, to enter into this Agreement, and to carry out the transactions
contemplated by this Agreement.
3.2 Corporate Action. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated by this Agreement have been authorized by all requisite limited
liability company action on the part of the Company.
3.3 Validity. This Agreement constitutes the legal, valid and
binding obligation of the Company enforceable in accordance with its terms
except as enforcement may be limited by bankruptcy, reorganization, insolvency,
moratorium or other similar laws presently or hereafter in effect affecting the
enforcement of creditors' rights generally and subject to general principles of
equity.
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3.4 Qualification as a Foreign Entity. The Company is duly qualified
and in good standing as a foreign limited liability company and licensed to
conduct the Opportunity as now being conducted in each jurisdiction in which the
Company is required to be qualified to conduct the Opportunity, except where
failure to be so qualified, in good standing and licensed would have no material
and adverse impact on the ownership of its assets and properties or the conduct
of the Opportunity.
3.5 Conflict with Other Instruments. Neither the execution and
delivery of this Agreement by the Company nor the consummation by the Company of
the transactions contemplated in this Agreement will (i) conflict with, or
result in a breach of, the terms, conditions or provisions of, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or result in the creation of a lien or encumbrance on, or cause
the triggering of a "due on sale" clause or similar restriction or provision
affecting, any of its assets or properties pursuant to (A) the formation
documents or limited liability company operating agreement ("Charter Documents")
of the Company or (B) any material indenture, mortgage, lease, agreement or
other instrument to which the Company is a party or by which it, or any of its
assets or properties, may be bound or affected, or (ii) violate any provision of
law, statute, rule or regulation to which the Company is subject or by which it
or its properties are bound except where a violation would have no material and
adverse impact on the ownership of its assets or properties or the conduct of
the Opportunity.
3.6 Capitalization. All of the holders of Company Membership Shares,
and their respective holdings of Company Membership Shares, in the Company are
set forth in Section 3.6(a) of the Company Disclosure Schedule (the "Company
Members"). All of the issued and outstanding Company Membership Shares have been
duly authorized and validly issued and are fully paid and non-assessable and
free of preemptive rights. To the Company's knowledge, there are no voting
trusts, shareholder agreements or other voting arrangements, capacities,
charges, liens or encumbrances on any Company Membership Shares that have been
entered into by the Company Members. Except as set forth in Section 3.6(b) of
the Company Disclosure Schedule with respect to Company Convertible Securities
or Company Stock Options, there is no outstanding subscription, contract,
convertible or exchangeable security, option, warrant, call or other right
obligating the Company to issue, sell, exchange, or otherwise dispose of, or to
purchase, redeem or otherwise acquire, shares of, or securities convertible into
or exchangeable for, Company Membership Shares.
3.7 No Adverse Change. There have been no material adverse change in
the condition, financial or otherwise, of the Opportunity or its assets or
properties, or in the prospects thereof or therefor. None of its assets or
properties or the Opportunity has been adversely affected in any material way
by, or sustained any material loss, whether or not insured, as a result of any
fire, flood, accident, explosion, strike, labor disturbance, riot, act of God or
the public enemy or other calamity or casualty. Except as previously disclosed
to Parent in writing pursuant to this Agreement, the Company (i) has not become
involved in any unresolved labor trouble or dispute which materially and
adversely affects the Opportunity, (ii) has not become a party to any collective
bargaining agreement, and (iii) has not suffered any liability, judgment, lien
or termination of contract or the imposition of any obligation, the effect of
which shall be materially adverse to the Opportunity or its assets or
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properties. Nothing has come to the attention of the Company that it believes
will cause a material adverse change in the prospects of the Opportunity.
3.8 Assets; Title to Assets. The assets or properties of the Company
consist principally of intellectual property rights and other proprietary rights
(the "Principal Assets"). The Company has good and marketable title to the
Principal Assets, free and clear of all mortgages, liens, claims or encumbrances
of any kind or any conditional sale agreement or other title retention
agreement.
3.9 Material Contracts. The Company has no Company Material
Contracts. As used herein, the term "Company Material Contracts" shall mean all
(i) employee benefit plans, share option schemes or agreements and employment,
consulting or similar contracts, (ii) contracts that involve remaining aggregate
payments by the Company in excess of $10,000 or which have a remaining term in
excess of two years, (iii) insurance policies, and (iv) all contracts that
would, if terminated, have a Company Material Adverse Effect. As used herein,
the term "Company Material Adverse Effect" shall mean any existing breach,
default or event of default by the Company, or event that with notice or lapse
of time or both would constitute a breach, default or event of default by the
Company, that, severally or in the aggregate, would have a material adverse
effect on the business, assets or prospects of the Company.
3.10 Litigation, Etc. There are no actions, suits, claims
investigations or proceedings pending in any court or by or before any
governmental agency to which the Company is a party or otherwise affecting the
Principal Assets or the Opportunity, and, to the best of the Company's
knowledge, after due inquiry, there is no action, suit, claim, investigation,
proceeding, grievance or controversy threatened against the Company with regard
to or affecting the Principal Assets or the Opportunity. There is no action,
suit, claim, investigation or proceeding known to the Company, after due
inquiry, which is pending or threatened that questions the validity or propriety
of this Agreement or any action taken or to be taken by the Company in
connection with this Agreement. The Company is not subject to any judicial
injunction or mandate or any quasi-judicial order or quasi-judicial restriction
directed to or against it as a result of its ownership of the Principal Assets
or its conduct of the Opportunity and no governmental agency has at any time
challenged or questioned in writing, or commenced or given notice of intention
to commence any investigation relating to, the legal right of the Company to
conduct the Opportunity or any part thereof, so as to materially and adversely
affect the ownership and use of the Principal Assets.
3.11 Compliance with Laws, Etc. The Company has complied with all
laws and regulations of any applicable jurisdiction with which it is or was
required to comply in connection with its ownership of the Principal Assets and
its conduct of the Opportunity, the enforcement of which would have a material
and adverse effect on the ownership of the Principal Assets or the conduct of
the Opportunity. The Company has all permits and permissions of governments,
governmental authorities and quasi-governmental authorities necessary to own the
Principal Assets and to conduct the Opportunity, except where failure to have
the permits and permissions would have no material and adverse effect on the
ownership of the Principal Assets or the conduct of the Opportunity.
3.12 Governmental Approvals. No authorization, consent or approval
or other order or action of or filing or registration with any court,
administrative agency, or other governmental or regulatory body or authority is
required for the execution and delivery by the Company of this Agreement or the
Company's consummation of the transactions contemplated hereby.
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3.13 Hazardous Waste. To the best of the Company's knowledge,
neither the Company nor any previous owner, tenant, occupant or user of any real
property now or previously owned or occupied by the Company ("Real Property")
used, generated, manufactured, treated, handled, refined, processed, released,
discharged, stored or disposed of any Hazardous Materials (as hereinafter
defined) on, under, in or about the Real Property, or transported any Hazardous
Materials to or from the Real Property. "Hazardous Materials," as used herein,
refers to any flammable materials, explosives, radioactive materials, asbestos,
organic compounds known as polychlorinated biphenyls, chemicals now known to
cause cancer or reproductive toxicity, pollutants, contaminants, hazardous
wastes, toxic substances or related materials, including any substance defined
as or included in the definition of "hazardous substances" under relevant law.
3.14 Patents, Licenses and Permits. The Principal Assets do not
contain any patents, licenses, permits, consents, approvals or authorizations of
governments, governmental authorities or quasi-governmental authorities (both
United States and foreign in connection with the Opportunity (the "Patents,
Licenses and Permits").
3.15 Trademarks, Tradenames, etc. The Company owns and uses under
license both registered and unregistered copyrights, trademarks, tradenames,
service marks, service names, and slogans in connection with the conduct of the
Opportunity as listed in Section 3.15 of the Company Disclosure Schedule (the
"Trademarks and Copyrights"), all of which are owned or licensed by the Company
as provided therein. No claims made by third parties with respect to any of the
Trademarks or Copyrights are pending. Except as set forth in Section 3.15 of the
Company Disclosure Schedule, there are no decrees, licenses, sublicenses,
agreements or limitations now in effect relating to any of the Trademarks or
Copyrights and there has been no notice to the Company that any Trademark or
Copyright infringes the rights of any third party or is being infringed by any
third party.
3.16 Books and Records, etc. Prior to the Closing Date, the Company
will make available to Parent copies of all books and records in the Company's
possession relating to the Opportunity and the Principal Assets, and on the
Closing Date the Company will deliver to Parent all these books and records.
These books and records are complete showing all issuances of membership
interests, all changes in the directors and executive officers and all
acquisitions and dispositions of significant assets since the formation of the
Company.
3.17 No Material Undisclosed Liabilities. Except as provided in
Section 3.17 of the Company Disclosure Schedule, there are no liabilities or
obligations of the Company of any nature, whether absolute, accrued, contingent,
or otherwise.
3.18 Tax Returns and Tax Liabilities. The Company has not been
required to file any tax returns. The Company has timely paid over to the taxing
authorities of each jurisdiction all taxes required to be collected by the
Company.
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3.19 Officers and Employees. The Company is member managed and there
are no officers or employees of the Company.
3.20 Principal Assets Constitute the Opportunity, etc. The Principal
Assets comprise substantially all of the assets, property, rights and business
owned by and employed by the Company in connection with the Opportunity and will
enable the Company to operate the Opportunity in substantially the same manner
after the Closing as it is being conducted immediately before the Closing. All
of the physical assets are serviceable for the purposes for which they are being
used on the date hereof.
3.21 Material Information. To the knowledge of the Company, none of
Section 3.6 of the Company Disclosure Schedule or any other written material
provided by the Company to Parent or its accountants, consultants, counsel or
other advisers in connection with the negotiation of this Agreement, as of their
respective dates contained, nor does this Agreement contain, any untrue
statement of a material fact or omit to state a material fact necessary to make
information contained therein or herein not misleading. To the knowledge of the
Company, there is no fact or condition that the Company has not disclosed to
Parent in writing which materially adversely affects the condition, financial or
otherwise, of the Principal Assets or the Opportunity or their prospects, or the
ability of the Company to perform any of its obligations under this Agreement.
3.22 No Other Agreements to Sell Assets or Equity Interests. The
Company has no legal obligation, absolute or contingent, to any person or firm
to sell the Opportunity or the Principal Assets relating to the Opportunity
(other than sales in the ordinary course of the Company's business) or any
equity interest therein, or to effect any merger, consolidation or other
reorganization of the Company or to enter into any agreement with any third
party.
Section 4. Representations and Warranties of Parent. Parent hereby
represents and warrants to the Company as follows:
4.1 Corporate Existence, Power and Authority. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada, and Parent has all requisite corporate power and
authority to conduct its business as now being conducted, and to own, lease or
otherwise hold its properties, to enter into this Agreement, and to carry out
the transactions contemplated by this Agreement.
4.2 Corporate Action. The execution and delivery of this Agreement
by Parent and the consummation by Parent of the transactions contemplated by
this Agreement have been authorized by all requisite corporate or company action
on the part of Parent and no approval of the stockholders of Parent is required
to the consummation by Parent of the transactions contemplated by this
Agreement.
4.3 Validity. This Agreement constitutes the legal, valid and
binding obligation of Parent, enforceable in accordance with its terms except as
enforcement may be limited by bankruptcy, reorganization, insolvency, moratorium
or other similar laws presently or hereafter in effect affecting the enforcement
of creditors' rights generally and subject to general principles of equity.
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4.4 Qualification as a Foreign Corporation. Parent is duly qualified
and in good standing as a foreign corporation or company and licensed to conduct
its business as now being conducted in each jurisdiction in which Parent is
required to be qualified to conduct its business, except where failure to be so
qualified, in good standing and licensed would have no material and adverse
impact on the ownership of its assets and properties or the conduct of Parent's
business as now conducted.
4.5 Conflict with Other Instruments. Neither the execution and
delivery of this Agreement by Parent nor the consummation by Parent of the
transactions contemplated in this Agreement will (i) conflict with, or result in
a breach of, the terms, conditions or provisions of, or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or result in the creation of a lien or encumbrance on, or cause the
triggering of a "due on sale" clause or similar restriction or provision
affecting, any of its assets or properties pursuant to (A) the Charter Documents
of Parent or (B) any material indenture, mortgage, lease, agreement or other
instrument to which Parent is a party or by which it, or any of its assets or
properties, may be bound or affected, or (ii) violate any provision of law,
statute, rule or regulation to which Parent is subject or by which it or its
properties are bound except where such violation would have no material and
adverse impact on the ownership of its assets or properties or the conduct of
Parent's business as now conducted.
4.6 Capitalization.
(a) The authorized capital stock of Parent consists of
250,000,000 shares of Parent Common Stock and 10,000,000 shares of Parent
Preferred Stock. As of December 14, 2010, 9,800,000 shares of Parent Common
Stock were issued and outstanding, not more than $60,000 in principal amount of
convertible notes of Parent (the "Convertible Notes") were issued and
outstanding, and not more than $30,000 of other indebtedness (the "Parent
Convertible Debt") was outstanding. There has been no change in the number of
issued and outstanding shares of common stock or indebtedness since that date
other than as contemplated in the Related Transactions. All of the issued and
outstanding shares of Parent Common Stock are, and all shares reserved for
issuance will be, upon issuance in accordance with the terms specified in the
instruments or agreements pursuant to which they are issuable, duly authorized,
validly issued, fully paid and non-assessable. Except as provided in this
Agreement, there is no outstanding subscription, contract, convertible or
exchangeable security, option, warrant, call or other right obligating Parent to
issue, sell, exchange, or otherwise dispose of, or to purchase, redeem or
otherwise acquire, shares of, or securities convertible into or exchangeable
for, capital stock of Parent.
(b) To Parent's knowledge, there are no voting trusts,
stockholder agreements or other voting arrangements that have been entered into
among the stockholders of Parent.
(c) The Parent Common Stock, upon issuance in accordance with
the Merger as provided in this Agreement, will be duly authorized, validly
issued, fully paid and non-assessable.
(d) Except as contemplated in the Related Transactions, there
are no outstanding contractual obligations of Parent or any Subsidiary of Parent
to repurchase, redeem or otherwise acquire any shares of capital stock or any
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capital stock of any Subsidiary of Parent or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
Subsidiary of Parent or any other person.
4.7 Governmental Approvals. No authorization, consent or approval or
other order or action of or filing or registration with any court,
administrative agency, or other governmental or regulatory body or authority is
required for the execution and delivery by Parent of this Agreement or Parent's
consummation of the transactions contemplated hereby.
4.8 Litigation. Except as disclosed in the Parent SEC Reports (as
defined in Section 4.10), (i) there are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of Parent, threatened against, relating
to or affecting, nor to the knowledge of Parent are there any governmental or
regulatory authority investigations or audits pending or threatened against,
relating to or affecting, Parent or any of its Subsidiaries or any of their
respective assets and properties, and there are no facts or circumstances known
to Parent that could be reasonably expected to give rise to any such action,
suit, arbitration, proceeding, investigation or audit, and (ii) neither Parent
nor any of its Subsidiaries is subject to any order of any governmental or
regulatory authority.
4.9 Compliance with Laws, etc. Parent has complied with all laws and
regulations of any applicable jurisdiction with which it is required to comply,
the enforcement of which could materially impair the ability of Parent to
perform its obligations under this Agreement.
4.10 SEC Reports and Financial Statements. Parent provided to the
Company prior to the execution of this Agreement by direction to the XXXXX
website maintained by the United States Securities and Exchange Commission (the
"SEC") a true and complete copy of each form, report, schedule, registration
statement, definitive proxy or information statement and other document
(together with all amendments thereof and supplements thereto) filed or required
to be filed by Parent or any of its Subsidiaries with the SEC since January 1,
2010 (as these documents have since the time of their filing been amended or
supplemented, the "Parent SEC Reports"). Parent did not file any reports with
the SEC except as set forth on the SEC's XXXXX website. As of their respective
dates, the Parent SEC Reports (i) complied as to form in all material respects
with all applicable requirements of the Securities Act or the Exchange Act, as
the case may be, and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited interim consolidated financial statements (including,
in each case, the notes, if any, thereto) included in the Parent SEC Reports
(the "Parent Financial Statements") complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto, were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto and except with respect to unaudited statements
as permitted by Form 10-Q of the SEC) and fairly present (subject, in the case
of the unaudited interim financial statements, to normal, recurring year-end
audit adjustments which are not expected to be, individually or in the
aggregate, materially adverse to Parent and its Subsidiaries taken as a whole)
the consolidated financial position of Parent and its consolidated Subsidiaries
as at the respective dates thereof and the consolidated results of their
operations and cash flows for the respective periods then ended. Each Subsidiary
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of Parent is treated as a consolidated Subsidiary of Parent in the Parent
Financial Statements for all periods covered thereby. Parent's information
statement on Schedule 14C and the mailing thereof in connection with the
amendment of Parent's Articles of Incorporation complied in all material
respects with the Exchange Act and the rules and regulations of the SEC
promulgated thereunder.
4.11 Absence of Certain Changes or Events. Except as disclosed in
the Parent SEC Reports, (a) since December 31, 2009, there has not been any
change, event or development, other than those occurring as a result of general
economic or financial conditions or other developments which are not unique to
Parent and its Subsidiaries but also generally affect other persons who
participate or are engaged in the lines of business in which Parent and its
Subsidiaries participate or are engaged and (b) between that date and the date
of this Agreement, Parent and its Subsidiaries have conducted their respective
businesses only in the ordinary course consistent with past practice.
4.12 Absence of Undisclosed Liabilities. Neither Parent nor any of
its Subsidiaries have any Parent Material Contracts. As used herein, the term
"Company Material Contracts" shall mean all (i) employee benefit plans, share
option schemes or agreements and employment, consulting or similar contracts,
(ii) contracts that involve remaining aggregate payments by Parent in excess of
$10,000 or which have a remaining term in excess of two years, (iii) insurance
policies, and (iv) all contracts that would, if terminated, have a Parent
Material Adverse Effect. As used herein, the term "Parent Material Adverse
Effect" shall mean any existing breach, default or event of default by Parent,
or event that with notice or lapse of time or both would constitute a breach,
default or event of default by Parent, that, severally or in the aggregate,
would have a material adverse effect on the business, assets or prospects of
Parent. Except for matters reflected or reserved against in the last balance
sheet included in a Parent SEC Report, neither Parent nor any of its
Subsidiaries had at that date, or has incurred since that date, any liabilities
or obligations (whether absolute, accrued, contingent, fixed or otherwise, or
whether due or to become due) of any nature that would be required by generally
accepted accounting principles to be reflected on a consolidated balance sheet
of Parent and its consolidated Subsidiaries (including in the notes).
4.13 Tax Returns and Tax Liabilities. Parent and each of its
Subsidiaries, on a consolidated basis or otherwise, has (i) filed all tax
returns required to be filed in any jurisdiction to which it is subject, (ii)
collected and paid over to the taxing authorities of each such jurisdiction all
taxes required to be collected by Parent from other persons, such as sales
taxes, payroll taxes, etc., (iii) either paid in full all taxes due to be paid
by it and all taxes claimed to be due and payable from it by each such
jurisdiction (except for any such taxes as are being contested in good faith by
appropriate proceedings), and any interest, additions to tax and penalties with
respect thereto, or provided adequate reserves for the payment thereof, (iv)
fully accrued on its books all taxes, and any interest, additions to tax and
penalties with respect thereto, for any period through the date hereof which are
not yet due, including such as are being contested, and (v) the amount of any
reserves and accruals in respect of taxes is at least equal to the net amount of
all taxes and any interest, additions to tax, penalties and deficiency
assessments, payable or which in the future become payable by Parent with
respect to all periods up to and including the date of this Agreement.
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4.14 Hazardous Waste. To the best of Parent's knowledge, neither
Parent nor any previous owner, tenant, occupant or user of any real property
owned, leased or occupied by Parent used, generated, manufactured, treated,
handled, refined, processed, released, discharged, stored or disposed of any
Hazardous Materials on, under, in or about such real property, or transported
any Hazardous Materials to or from such real property.
To the best of Parent's knowledge, Parent has kept and maintained
any real property owned, leased or occupied by Parent, including the groundwater
on or under such real property, and conducted its business in compliance with
all applicable federal, state and local laws, ordinances or regulations, now or
previously in effect, relating to environmental conditions, industrial hygiene
or Hazardous Materials on, under, in or about such real property including all
relevant laws.
Section 5. Conditions Precedent to Obligations of Parent. All obligations
of Parent under this Agreement to be performed on and after the Closing Date
are, at the option of Parent, subject to the satisfaction of the following
conditions precedent at the Closing, as indicated below:
5.1 Proceedings Satisfactory. All actions, proceedings, instruments,
opinions and documents required to carry out this Agreement or incidental
hereto, and all other related legal matters, shall be reasonably satisfactory to
Parent and to counsel for Parent. The Company shall have delivered to Parent on
the Closing Date the documents and other evidence as Parent may reasonably
request in order to establish the consummation of the transactions contemplated
by this Agreement, the taking of all corporate and other proceedings in
connection therewith and the compliance with the conditions set forth in this
Section 5, in form and substance reasonably satisfactory to Parent.
5.2 Member Approval. This Agreement shall have been adopted by the
requisite vote of the members of the Company under the State Reorganization
Statutes and the Company's Charter Documents.
5.3 Representations and Warranties of the Company Correct. The
representations and warranties made by the Company in Section 3 shall be, and
tender by the Company of any documents required to be delivered at the Closing
by it shall constitute a representation by the Company as at the Closing that,
except as otherwise specifically approved in writing by Parent, the
representations and warranties of the Company are true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though all the representations and warranties had been made on and as of the
Closing Date after giving effect to any transactions or other actions
contemplated by this Agreement.
5.4 Compliance with Terms and Conditions. All the terms, covenants,
agreements and conditions of this Agreement to be complied with and performed by
the Company on or before the Closing Date shall have been (and tender by the
Company of any documents required to be delivered at the Closing shall
constitute a representation by the Company as at the Closing that, except as
otherwise specifically approved in writing by Parent, they have been) complied
with and performed in all material respects.
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5.5 No Proceedings Pending. No action, suit, claim, investigation or
proceeding by or before any court, administrative agency or other governmental
or regulatory body or authority shall have been instituted or threatened which
may restrain, prohibit or invalidate any of the transactions contemplated by
this Agreement or that may affect the right to operate or control after the
Closing Date any of the Principal Assets or the Opportunity.
5.6 No Material Change. There shall have been no material adverse
change in the condition, financial or otherwise, of the Company or the Principal
Assets, or in the prospects thereof or therefor, and none of the Company or the
Principal Assets shall have been, in the judgment of Parent, adversely affected
in any material way by, or sustained any material loss, whether or not insured,
as a result of, any fire, flood, accident, explosion, strike, labor disturbance,
riot, act of God or the public enemy or other calamity or casualty. The Company
shall not (i) be involved in any unresolved labor trouble or dispute which
materially and adversely affects the business or prospects of the Company; (ii)
have become a party to any collective bargaining agreement; or (iii) have
suffered any liability, judgment, lien or termination of contract or the
imposition of any obligation, the effect of which shall, in the judgment of
Parent, be materially adverse to the Company, the Principal Assets of the
prospects of either.
5.7 Certificates. The Company shall have delivered to Parent (i) a
copy of the Charter Documents, as amended, of the Company, certified with
respect to Charter Documents filed with the Virginia Commission as of a recent
date by the Virginia Commission; (ii) a certificate as to the good standing of
the Company as a foreign limited liability company qualified to do business in
each jurisdiction in which the Company is required to be qualified to conduct
the Opportunity, except where failure to be so qualified, in good standing and
licensed would have no material and adverse impact on the ownership of its
assets and properties or the conduct of the Opportunity, dated as of a recent
date; (iii) a certificate of a manager of the Company dated the Closing Date and
certifying (A) that attached to the certificate is a true, correct and complete
copy of the Charter Documents of the Company as in effect on the date of the
certificate and at all times since a date prior to the date of the resolutions
of the Company described in item (B) below, (B) that attached is a true, correct
and complete copy of the resolutions adopted by the managers or members of the
Company, as the case may be, authorizing the execution, delivery and performance
of this Agreement and all other documents delivered by the Company and the
consummation by the Company of the transactions contemplated by this Agreement
and any other documents, and that these resolutions have not been modified,
rescinded or amended and are in full force and effect, (C) that the Charter
Documents of the Company filed with the Virginia Commission have not been
amended since the date of the last amendment shown on the certificate of good
standing furnished pursuant to (i) above and no action has been taken by the
Company or its shareholders, members, directors, managers or officers in
contemplation of the filing of any amendment or in contemplation of the
liquidation or dissolution of the Company, and (D) that the representations and
warranties of the Company in Section 3 are true and correct as of the Closing
Date with the same force and effect as if made on and as of the Closing Date and
the Company has complied with all the terms and provisions contained in this
Agreement or in the other documents delivered in connection with this Agreement.
5.8 Convertible Company Liabilities. The Company shall have
eliminated the convertibility of all Company indebtedness so that, as of the
Effective Time, all Company Convertible Securities shall be convertible into a
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number of Company Membership Shares such that, pursuant to Section 2.1(c), the
Company Convertible Securities will be convertible into an aggregate of
24,000,000 shares of Parent Common Stock following the Merger.
5.9 License Agreement. Xxxxxx Xxxxx and the Company shall have
entered into a license agreement (the "License Agreement") relating to the
license of the intellectual property comprising the "Alltimate Ball" trademark,
the "AB" logo, and related intellectual property.
Section 6. Conditions Precedent to Obligations of the Company. All
obligations of the Company to be performed on or after the Closing Date are, at
the option of the Company, subject to the satisfaction of the following
conditions precedent at the Closing, as indicated below:
6.1 Proceedings Satisfactory. All actions, proceedings, instruments,
opinions and documents required to carry out this Agreement or incidental hereto
and all other related legal matters (including the assumption of Parent's
liabilities) shall be reasonably satisfactory to the Company and to counsel for
the Company. Parent shall have delivered to the Company on the Closing Date such
documents and other evidence as the Company may reasonably request in order to
establish the consummation of the transactions contemplated by this Agreement,
the taking of all corporate and other proceedings in connection therewith and
the compliance with the conditions set forth in this Section 6, in form and
substance reasonably satisfactory to the Company.
6.2 Representations and Warranties of Parent Correct. The
representations and warranties made by Parent in Section 4 of this Agreement
shall be (and tender by Parent of any documents required to be delivered at the
Closing by it shall constitute a representation by Parent at the Closing that,
except as otherwise specifically approved in writing by the Company, such
representations and warranties of Parent are) true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
all such representations and warranties had been made on and as of the Closing
Date after giving effect to any transactions or other actions contemplated
hereby.
6.3 Compliance with Terms and Conditions. All the terms, covenants
and conditions of this Agreement to be complied with and performed by Parent on
or before the Closing Date shall have been (and tender by Parent of any
documents required to be delivered at the Closing by it shall constitute a
representation by Parent as at the Closing that, except as otherwise
specifically approved in writing by the Company, they have been) complied with
and performed in all material respects.
6.4 Legal Opinions of Parent's Counsel. Parent shall have delivered
to the Company and Parent opinions of Xxxxxx X. Xxxxx, Xx., Esq., counsel for
Parent, dated the Closing Date and addressed to the Company and Parent, in forms
and substance satisfactory to the Company.
6.5 Certificates. Parent shall have delivered to the Company (i) a
copy of the filed Charter Documents, as amended, of Parent, certified as of a
recent date by the Nevada Secretary of State; (ii) a certificate of the
Secretary of Parent dated the Closing Date and certifying (A) that attached is a
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true, correct and complete copy of the Charter Documents of Parent as in effect
on the date of the certificate and at all times since a date prior to the date
of the resolutions of Parent described in item (B) below, (B) that attached is a
true, correct and complete copy of the resolutions adopted by the Board of
Directors of Parent authorizing the execution, delivery and performance of this
Agreement and all other documents delivered by Parent and the consummation by
Parent of the transactions contemplated by this Agreement and all other
documents, and that these resolutions have not been modified, rescinded or
amended and are in full force and effect, (C) that the filed Charter Documents
of Parent have not been amended since the date of the last amendment furnished
pursuant to (i) above and no action has been taken by Parent or its
shareholders, directors or officers in contemplation of the filing of any
further amendment or in contemplation of the liquidation or dissolution of
Parent, and (D) as to the incumbency and specimen signature of the officer of
Parent executing this Agreement or any other document; (iii) a certificate of
counsel to Parent dated the Closing Date as to the incumbency and signature of
the Secretary of Parent; (iv) a certificate of the Chairman of the Board of
Directors, President or a Vice President of Parent stating that the
representations and warranties of Parent in Section 4 are true and correct as of
the Closing Date with the same force and effect as if made on and as of the
Closing Date and Parent has complied with all the terms and provisions contained
in this Agreement or in the other documents delivered in connection with this
Agreement.
6.6 Capitalization Assumptions. As set forth and based on the
assumptions set forth in Schedule 6.6, including any other adjustments
contemplated in this Agreement, and completion of the Closing, the holders of
Company Membership Shares immediately prior to the Effective Time (the "Company
Shareholders") shall own beneficially not less than the percentage of the
Parent's issued and outstanding shares of common stock as set forth in Schedule
6.6.
6.7 Elimination of Liabilities; Conversion of Convertible
Indebtedness. Except as provided in this Section 6.7 or in Section 11.1, Parent
shall have eliminated all obligations and liabilities of Parent other than the
Convertible Notes, including through the conversion of such indebtedness into
not more than 15,200,000 shares of Parent Common Stock ("Debt Conversion
Shares"), in each case to the satisfaction of the Company and its counsel as
required under Section 8.6. At Close Parent will have Parent Convertible Debt
which is convertible into not more than 10,670,000 shares of Parent Common
Stock.
6.8 Parent Director and Officers. The sole Parent Director and
Officer shall have (i) resigned as an officer of Parent and (ii) tendered his
resignation as a director of Parent, such Director resignation to become
effective automatically upon expiration of any applicable waiting period under
Rule 14f-1 promulgated under the Exchange Act as referenced below. Concurrently,
the persons identified on Exhibit A shall have been elected or appointed to the
Parent Board of Directors, with the election or appointment of Xx. Xxxxx being
effective as of the Effective Time and the election or appointment of the other
director designees to be effective upon expiration of any applicable waiting
period under Rule 14f-1 promulgated under the Exchange Act and Xx. Xxxxx
(directly or through his wholly-owned entity) and Parent shall have executed a
compensation agreement by which Xx. Xxxxx becomes Chairman and Chief Executive
Officer of Parent, effective as of the Effective Time.
6.9 Charter Amendments. Parent shall have given any
notice to stockholders as contemplated in Section 8.3(a)(3) and the amendments
to Parent's Articles of Incorporation provided for in Section 8.3(a)(1) shall
have been filed with the Nevada Secretary of State and be effective.
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6.10 License Agreement. Xxxxxx Xxxxx and the Company shall have
entered into the License Agreement.
Section 7. Additional Covenants of the Company.
7.1 Consents. The Company covenants to Parent that it will use its
commercially reasonable efforts to obtain or cause to be obtained from any
required parties any consents, approvals, authorizations or waivers required in
connection with the Merger.
7.2 Cooperation. The Company covenants to Parent that it will:
(a) Access to Information. Cooperate and cause others under
the control of the Company to cooperate to the end of providing Parent and its
counsel, accountants and other designated representatives full access during
normal business hours to the properties, books, contracts, commitments and other
records (including computer files, retrieval programs and related documentation)
of the Company relating to the Principal Assets or the Opportunity, and the
Company will furnish or cause to be furnished to Parent and its representatives
all this information and data as Parent or its representatives reasonably may
request. Parent may contact vendors, customers and manufacturers and others with
whom the Company does business in connection with the Opportunity; and
(b) Keep Parent Informed. Promptly notify Parent of any
material matter or thing occurring that adversely affects the condition,
financial or otherwise, of the Principal Assets or the Opportunity, or the
prospects thereof or therefor.
7.3 Preserve the Opportunity. The Company covenants to Parent that:
(a) the Company will do or cause to be done all things
necessary and appropriate to (A) continue operation of the Opportunity in the
ordinary course in the same manner in which it has been conducted; (B) preserve
intact the business organization and reputation of the Company; (C) continue and
maintain in force any insurance; (D) except as otherwise contemplated herein,
use its best efforts to keep available the services of the management and
employees of the Company; and (E) preserve the goodwill of suppliers, customers
and others having business relations with the Company; and
(b) the Company will not, without the prior consent of Parent,
(A) sell (except in the ordinary course of the conduct of the Opportunity),
pledge, assign, lease, give a security interest in or otherwise encumber any of
the Principal Assets; (B) enter into any commitment with respect to the
operation of the Opportunity, except in the ordinary course of the conduct of
the Opportunity; (C) voluntarily incur or become subject to, or agree to incur
or become subject to, any obligation or liability (absolute or contingent) in
connection with the Opportunity, except current liabilities incurred and
obligations under contracts entered into in the ordinary course of the conduct
of the Opportunity; (D) discharge or satisfy any lien or encumbrance or pay any
obligation or liability (absolute or contingent) in connection with the
17
Opportunity, except current liabilities incurred in the ordinary course of the
conduct of the Opportunity; (E) declare or make, or enter into any agreement to
declare or make, any payment of dividends or distributions of any assets of any
kind whatsoever to shareholders of the Company, or purchase or redeem, or agree
to purchase or redeem, any of its stock or other securities; (F) mortgage,
pledge, or suffer any lien, charge or any other encumbrance, or enter into any
agreement to do so, in respect to any of the Principal Assets; (G) sell or
transfer, or enter into any agreement to sell or transfer, any of the Principal
Assets or cancel or enter into any agreement to cancel any debts or claims,
except in each case in the ordinary course of the conduct of the Opportunity;
(H) bring about or cause to occur any extraordinary losses or waive any rights
of substantial value; (I) enter into any transactions other than in the ordinary
course of the conduct of the Opportunity; (J) terminate any material contract,
agreement, license or other instrument to which it is a party, except agreements
that are by their terms terminable in the ordinary course of the conduct of the
Opportunity; (K) through negotiation or otherwise, make any commitment or incur
any liability or obligation to any labor organization; (L) make, or agree to
make, any accrual or arrangement for or payment of bonuses or special
compensation of any kind to any officer, employee or agent (except as permitted
or required by this Agreement); (M) increase the rate of compensation payable or
to become payable by the Company to any of its officers, employees or agents
over the rate being paid to them at the date of this Agreement; (N) directly or
indirectly, pay or make a commitment to pay any severance or termination pay to
any officer, employee or agent; (O) introduce any new method of accounting in
respect of the Principal Assets, Opportunity, or rights applicable thereto; (P)
make any capital expenditures or enter into commitments for capital expenditures
exceeding in the aggregate $10,000; or (Q) enter into any transactions other
than in the ordinary course of the conduct of the Opportunity.
7.4 Ordinary Course. The Company covenants to Parent that,
notwithstanding Section 7.3, it covenants and agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement, or to the extent that Parent shall otherwise consent in writing) the
Company and each of its Subsidiaries shall conduct its businesses only in, and
none of the Company and Subsidiaries shall take any action except in the
ordinary course consistent with past practice.
Section 8. Additional Covenants by Parent.
8.1 Consents and Waivers. Parent covenants to the Company that it
will use its commercially reasonable efforts to obtain or cause to be obtained
from any required parties any consents, approvals, authorizations or waivers
required in connection with the Merger and the Related Transactions.
8.2 Books and Records. Parent shall permit the Company and its
authorized representatives, in connection with (i) the preparation of the
Company's tax returns, (ii) the determination or enforcement of the Company's
rights and obligations under this Agreement, (iii) the Company's compliance with
the requirements of any governmental or quasi-governmental authority or body or
(iv) the matters described in paragraph (c) below, to have reasonable access
during normal business hours to the Books and Records relating to the operation
of the Opportunity prior to the Closing Date.
8.3 Related Transactions. As soon as practicable, and in any event
prior to any time set forth below, the Parent shall effect or implement the
following actions (the "Related Transactions"):
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(a) Prior to the Closing, Parent shall have caused the
conversion of all of the Convertible Notes for conversion as provided in
Sections 6.7 and 8.6.
(b) Promptly following the date of this Agreement, Parent
shall prepare and, concurrent with the Closing, Parent shall file with the SEC
any statements or schedules required pursuant to Rule 14f-1 under the Exchange
Act and shall send the statements or schedules to all Parent shareholders as
promptly as practicable.
(c) At Closing, Parent shall have Parent Convertible Debt
which converts into not more than 10,670,000 shares of Parent Common Stock.
(d) Effective as of Closing, Parent shall have reserved for
issuance to not more than two directors to be appointed to the Board of
Directors of Parent following the Closing a total of 13,330,000 shares of Parent
Common Stock.
8.4 Announcing and Other Disclosures. Contemporaneous with or prior
to the earlier of (i) Parent's first public announcement of the Merger and (ii)
5:30 p.m. (New York City time) on the fourth (4th) business day following the
Closing Date, Parent shall file a Current Report on Form 8-K with the SEC
describing the terms of the transactions contemplated by this Agreement in the
form required by the Exchange Act, including any required financial statements.
Parent shall not make any public announcement regarding the transactions prior
to the Closing. Parent shall timely prepare and file with the SEC and state
securities regulators appropriate Forms D and other notice filings relating to
the offer and sale of Parent Common Stock in the Merger and the Private
Placement.
8.5 Ordinary Course. At all times from and after the date hereof
until the Closing Date, Parent covenants and agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement, or to the extent that the Company shall otherwise consent in writing)
Parent and each of its Subsidiaries shall conduct its businesses only in, and
none of Parent and such Subsidiaries shall take any action except in the
ordinary course consistent with past practice.
8.6 Elimination of Liabilities;. Prior to the Closing Date, Parent
shall cause all Convertible Notes to be tendered for conversion into the Note
Conversion Shares and, subject to Sections 6.7 and Section 11.1, cause all other
obligations and liabilities of Parent and its Subsidiaries to be satisfied
(including through conversion into Debt Conversion Shares) or assumed by a third
party (together with appropriate releases or indemnities in favor of Parent and
the appropriate Subsidiaries), in each case effective as of the Effective Time
and in form and substance satisfactory to the Company and its counsel.
8.7 Company Convertible Securities.
(a) At the Effective Time, each Company Convertible Security
shall be deemed to constitute an option or right to acquire, on the same terms
and conditions as were applicable under such Company Stock Option or Company
Convertible Security, a number of shares of Parent Common Stock equal to the
product (rounded down to the nearest whole share) of (i) the number of Company
Membership Shares issuable upon exercise of the option or conversion of the
Company Convertible Security immediately prior to the Effective Time and (ii)
the Conversion Number; and the option exercise price per share of Parent Common
Stock at which such option is exercisable shall be the amount (rounded up to the
19
nearest whole cent) obtained by dividing (iii) the option exercise price per
Company Membership Share at which such option is exercisable immediately prior
to the Effective Time by (iv) the Conversion Number; provided, however, that, in
the case of any Company Stock Option to which Sections 421 of the Code applies
by reason of its qualification under any of Sections 422 to 424 of the Code
("qualified stock options"), the option price, the number of shares purchasable
pursuant to such option and the terms and conditions of exercise of such option
shall be determined in order to comply with Section 425(a) of the Code.
(b) As soon as practicable after the Effective Time, Parent
shall deliver to the participants in the Company Option Plan and holders of
Company Convertible Securities appropriate notices setting forth such
participants' and holders' rights pursuant thereto and the grants pursuant to
the Company Option Plan shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section after giving
effect to the Merger). Parent shall comply with the terms of the Company Option
Plan and the Company Convertible Securities and ensure, to the extent required
by, and subject to the provisions of, the Company Option Plan, that the Company
Stock Options which qualified as qualified stock options prior to the Effective
Time continue to qualify as qualified stock options after the Effective Time.
(c) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery under the Company Option Plan and all Company Convertible Securities as
adjusted in accordance with this Section.
Section 9. Indemnification.
9.1 Indemnity Agreement of the Company. Subject to the provisions
and limitations of this Section 9, the Company agrees to indemnify and save
harmless Parent and its officers, directors, representatives, and agents from
and against:
(a) Failure to Perform Obligations. Any Event of Loss (as
defined below) or Loss (as defined below) arising as a result of the Company's
failure to perform or discharge any of its duties or obligations to be performed
by the Company prior to the Closing Date; and
(b) Breach of Representation Warranty or Covenant. Any Event
of Loss or Loss arising from any breach of a representation, warranty or
covenant of the Company set forth in this Agreement.
9.2 Indemnity Agreement of Parent. Subject to the provisions and
limitations of this Section 9, Parent, Xxxx Xxxxxx and each holder of
Convertible Notes or other obligations or liabilities satisfied through the
issuance of Note Conversion Shares or Debt Conversion Shares as contemplated in
Section 8.6 shall, pursuant to such debt conversion agreements, each for itself,
its successors and assigns, indemnify and save harmless the Company, its
officers, managers, representatives and agents from and against:
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(a) Failure to Perform Obligations. Any Event of Loss or Loss
arising as a result of Parent's failure to discharge or perform any duties or
obligations to be performed by Parent prior to the Closing Date; and
(b) Breach of Representation, Warranty or Covenant. Any Event
of Loss or Loss arising from any breach of a representation, warranty or
covenant of Parent set forth in this Agreement.
9.3 Definition of "Loss". Any party to this Agreement against which
indemnification may be sought pursuant to this Section 9 is an "Indemnifying
Party," and any person entitled to indemnification pursuant to this Section 9 is
an "Indemnified Party." The occurrence of an event that may result in a loss,
cost, expense or liability of an Indemnified Party and as to which the
Indemnifying Party shall have received notice from the Indemnified Party shall
be herein called an "Event of Loss," and the amount of any loss, cost, expense
or liability of any kind (including legal fees and disbursements incurred) of an
Indemnified Party is a "Loss;" provided, however, that for purposes of computing
the amount of Loss incurred by any Indemnified Party, there shall be deducted an
amount equal to the amount of any insurance proceeds (other than self-insurance)
directly or indirectly received by the Indemnified Party in connection with the
Loss.
In addition, the Indemnifying Party shall indemnify the Indemnified
Party against an amount that, on an after-tax basis reflects the hypothetical
tax consequences, if any, to the Indemnified Party of the payment of the Loss.
9.4 Insurance Proceeds Received After Indemnification. Each party
agrees that, if it receives any payments from the other party with respect to
any Loss pursuant to this Section 9 and subsequently it receives any amount of
insurance proceeds (other than from self-insurance) in connection with the Loss
or the circumstances giving rise to the Loss, the Indemnified Party shall
reimburse promptly (or cause to be delivered) to the Indemnifying Party an
amount equal to the lesser of the insurance proceeds or the indemnified Loss.
9.5 Deductible Amount and Time Period. An Indemnifying Party shall
not be required to make any indemnification payments for which it would
otherwise be liable until (and then only to the extent that) the total of all
amounts to which the Indemnified Party would be entitled with respect to all
Losses actually exceeds $25,000. However, this limitation on liability shall not
be applicable to any payments to be made by the Indemnifying Party pursuant to
any provision of this Agreement (other than those set forth in this Section 9),
any provision of any instrument of assumption, or with respect to the
elimination of liabilities of Parent and its Subsidiaries as required pursuant
to Section 8.6.
The Indemnifying Party shall have no liability for any Loss arising
out of claims under this Agreement as to which the Indemnifying Party shall not
have received notice within eighteen (18) months from the Closing Date, except
with respect to the elimination of liabilities of Parent and its Subsidiaries as
required pursuant to Section 8.6, for which there shall be no expiry.
9.6 Defense of Claims. In case any legal action shall be commenced
or threatened (provided that in the case of a threatened legal action the
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Indemnified Party believes in good faith that an indemnifiable Loss is likely to
occur) against an Indemnified Party that could result in a Loss, the Indemnified
Party shall promptly notify the Indemnifying Party in writing. The Indemnifying
Party shall have the right, exercisable by written notice promptly after receipt
of the notice, (A) to participate in and (B) assume (and control) the defense of
the action, at its own expense and with its own counsel, provided counsel is
reasonably satisfactory to the Indemnified Party. If the Indemnifying Party
elects to assume the defense of the action, the Indemnifying Party shall keep
the Indemnified Party informed of all material developments and events and the
Indemnified Party shall have the right to participate in (but not control) the
defense of the action. However, the Indemnified Party shall bear its own
expenses of participation except as set forth in the following sentence. The
Indemnifying Party shall bear the reasonable fees and expenses of counsel
retained by the Indemnified Party if (i) the Indemnified Party shall have
retained counsel due to actual or potential conflicting interests between the
Indemnified Party and the Indemnifying Party, (ii) the Indemnifying Party shall
not elect to assume the defense of the action, (iii) the Indemnifying Party
shall not have employed counsel reasonably satisfactory to the Indemnified
Party, or (iv) the Indemnifying Party has authorized the employment of counsel
for the Indemnified Party to handle the defense of the action at the expense of
the Indemnifying Party.
In no event will the Indemnifying Party be liable for any settlement
or admission of liability with respect to any action without its prior written
consent, which shall not be unreasonably withheld, but if settled with this
consent, the Indemnifying Party shall be liable for payment of the settlement or
judgment amount, subject to the limitations set forth in this Section 9. The
Indemnifying Party may not settle any liability or claim subject to
indemnification pursuant to this Section 9 without the consent of the
Indemnified Party and on any basis that does not provide for a full release of
the Indemnified Party. Any participation in, or assumption of the defense of,
any action by an Indemnifying Party shall be without prejudice to the right of
the Indemnifying Party, and shall not be construed as a waiver of its right to
deny the obligation to indemnify the Indemnified Party. The giving of notice as
above provided of a loss, damage, cost or expense claimed to be indemnifiable
shall be a prerequisite to any obligation to indemnify. However, the Indemnified
Party's rights pursuant to this Section 9 shall not be forfeited by reason of a
failure to give the required notice or to cooperate in the defense to the extent
the failure does not have a material and adverse effect on the defense of the
matter.
9.7 Payment of Loss; Subrogation. Any Loss for which an Indemnified
Party is entitled to payment shall be paid by the Indemnifying Party upon
written demand by the Indemnified Party. The Indemnified Party shall be
subrogated to any claims or rights of the Indemnifying Party as against any
other persons with respect to any Loss paid by the Indemnifying Party under this
Section 9. The Indemnified Party shall cooperate with the Indemnifying Party to
a reasonable extent, at the Indemnifying Party's expense, in the assertion by
the Indemnifying Party of any claims against third persons.
9.8 Notice of Event of Loss. Each party agrees that it will give
notice to the other party promptly, but in no event later than 30 days, after
the receipt by one of its responsible officers of knowledge of facts which, if
not corrected, would be an Event of Loss hereunder. Each party shall make
available to the other party and its counsel and accountants, at reasonable
times and for reasonable periods, during normal business hours, all books and
records of the party relating to any possible Event of Loss, and each party will
22
render to the other assistance as it may reasonably require of the other in
order to insure prompt and adequate prosecution of the defense of any suit,
claim or proceeding.
Section 10. Termination of Agreement. This Agreement and the transactions
contemplated hereby may be terminated in the following manner:
10.1 This Agreement may be terminated at any time before Closing by
the mutual consent of the Board of Directors of Parent and a manager of the
Company.
10.2 Parent may terminate this Agreement, at its sole option, if the
Closing has not occurred by December 30, 2010.
10.3 The Company may terminate this Agreement, at its sole option,
if the Closing has not occurred by December 30, 2010.
10.4 Either Parent or the Company may terminate this Agreement prior
to Closing if:
(a) the other breaches its representations, warranties or
covenants in any material respect; or
(b) any event occurs or fails to occur which renders
impracticable satisfaction of any of the conditions to its respective
obligations under Sections 5 or 6.
10.5 Upon termination of this Agreement as provided for above and
notwithstanding any other provision of this Agreement, none of the parties shall
have any further rights or obligations under this Agreement, except that the
provisions of Section 11.1, 11.2, 11.4, 11.7, 11.8, 11.10, 11.11, 11.12 and
11.13 shall survive.
10.6 Written notice of termination of this Agreement, as provided
for in this Section 10, shall be given by the party so terminating to the other
party, in accordance with the provisions of Section 11.12.
Section 11. Miscellaneous Provisions.
11.1 Expenses. Except as otherwise provided in this Agreement, each
party hereto shall pay its own expenses incident to the origination, negotiation
and execution of this Agreement and the consummation of the transactions
contemplated hereby, including all legal and accounting fees and disbursements.
Notwithstanding anything to the contrary contained in this Agreement, the
Surviving Corporation shall be pay the actual and reasonable attorneys' fees and
costs of Parent incurred in connection with the negotiation and execution of
this Agreement and consummation of the transactions contemplated hereby.
11.2 Payment and Expenses of Other Parties. The Company and Parent
agree that if subsequent to the Closing Date any of them shall receive any
payment due to another party each shall promptly remit the same to the other
(net of any tax imposed upon either party in respect of the receipt of the
payment), and if any party shall pay any obligations of the other not assumed by
it under this Agreement, the payment shall be for the account of the party to
whom the obligation relates and that party shall promptly reimburse the other
party.
23
11.3 Exhibits and Schedules. The Exhibits and Schedules attached are
incorporated herein and made a part hereof for all purposes. The expression
"this Agreement" means the body of this Agreement and the Exhibits and
Schedules. The expressions "herein," "hereof," and "hereunder" and other words
of similar import refer to this Agreement and the Exhibits and Schedules as a
whole and not to any particular part or subdivision.
11.4 Survival of Obligations. Subject to the applicable limitations
of Section 10 above, the respective representations, warranties, covenants and
agreements of the parties to this Agreement shall survive consummation of the
transactions contemplated by this Agreement and shall continue in full force and
effect after the Closing Date.
11.5 Amendments and Waivers. Except as otherwise specifically
stated, any provision of this Agreement may be amended by, and only by, a
written instrument executed by Parent on one part and the Company on another
part. Through a signed writing, either party may extend the time for or waive
the performance of any obligation of the other party, waive any inaccuracies in
the representations or warranties by the other party or waive compliance by the
other party with any of the terms and conditions contained in this Agreement.
11.6 Further Assurances. From and after the Closing Date, the
parties shall cooperate with one another by furnishing any additional
information, executing and delivering any additional documents and instruments,
and doing all other things as may be reasonably required by the parties or their
counsel to consummate or otherwise implement the transactions contemplated by
this Agreement.
11.7 Public Statements. Except as may be required by law, neither
the Company nor Parent shall issue any press release or other public statement
concerning the transactions contemplated by this Agreement without first
providing the other with a written copy of the proposed text and obtaining the
other party's written consent.
11.8 Confidentiality. If the transactions contemplated by this
Agreement shall be consummated, (i) the Company shall keep this Agreement, its
terms, and all documents and information relating to this Agreement and to the
Opportunity confidential, except as may be required by law and (ii) Parent shall
keep this Agreement, its terms, and all documents and information received from
the Company, to the extent they relate to anything other than the Opportunity,
confidential, except as may be required by law. In the event that the
transactions contemplated by this Agreement shall not be consummated, each party
(i) shall return to the other party all documents and written information as it
shall have received from the other party in connection with this Agreement, (ii)
shall treat the documents and information as confidential, and (iii) shall not
disclose or utilize, and shall use its best efforts to prevent any of its
employees from disclosing or utilizing, the documents and information. However,
in any event, the restrictions shall not apply to any document or information,
as evidenced by a party's written records, that were (A) already known to the
other party prior to receipt from the disclosing party, (B) publicly available
at the time of the disclosure by the disclosing party or subsequently became
publicly available through no fault of the other party, or (C) approved for
public disclosure by the written authorization of the disclosing party The
parties' obligations under this Section 11.8 shall continue and survive
termination of this Agreement for a period of five years from the date of this
Agreement.
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11.9 Parties Bound. This Agreement shall inure to the benefit of and
be enforceable against the parties and their respective successors and permitted
assigns. The rights and obligations of any party shall not be assignable without
the consent of the other parties.
11.10 Governing Law. This Agreement, and the rights and obligations
of the parties hereto, shall be governed by and construed in accordance with the
laws of the State of California. Jurisdiction and venue for any action or
proceeding shall be in the appropriate federal or state court located within the
County of Los Angeles, State of California.
11.11 Remedies. Each party recognizes that money damages may be
inadequate to compensate a party for a breach by the other party of its
obligations under this Agreement, and each party agrees that in the event of a
breach, the non-breaching party may apply for an injunction of specific
performance or the granting of other equitable remedies as may be awarded by a
court of competent jurisdiction in order to afford the non-breaching party the
benefits of this Agreement. The breaching party shall not object to the
application, entry of the injunction or granting of other equitable remedies on
the ground that money damages will be sufficient to compensate the non-breaching
party.
11.12 Notices. Any notice, demand, approval, consent, request,
waiver or other communication that may be or is required to be given pursuant to
this Agreement shall be in writing and shall be deemed given on the earlier of
the day actually received or on the close of business on the third business day
next following the day when deposited in the United States mail, postage
prepaid, certified or registered, addressed to the party at the address set
forth after its respective name below, or at a different address as a party
shall have advised the other party in writing, with copies sent to the persons
indicated:
If to the Company:
Legacy Athletic Apparel, LLC
c/o Case Xxxxxxxx & Jordan LLP
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
If to Parent:
Mondial Ventures, Inc.
000 Xxxxxxxx Xx., Xxxxx 000
Xxxxxxx, XX X0X 0X0
Attention: Xxxx Xxxxxx
11.13 Invalid Provisions. If any provision hereof is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term of this Agreement, the provision shall be fully severable. This
Agreement shall be construed and enforced as if the illegal, invalid or
unenforceable provision had never comprised a part of it and the remaining
provisions shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance. In lieu of
25
the severed provision there shall be added automatically a provision as similar
in terms to the severed provision as may be possible and be legal, valid and
enforceable.
11.14 Miscellaneous. The captions, headings and arrangements used in
this Agreement are for convenience only and do not affect, limit or amplify its
terms and provisions. Whenever the singular number is used, the same shall
include the plural where appropriate, and the words of any gender shall include
each other gender where appropriate. Unless otherwise specified or agreed to in
writing by the parties, all accounting terms used in this Agreement shall be
interpreted in accordance with United States generally accepted accounting
principles applied on a consistent basis. Each party agrees to pay all expenses
and fees it has incurred to the extent that it has engaged a broker or finder in
connection with this transaction and further agrees to indemnify and save the
other party hereto harmless from any claims by any such brokers or finders in
connection with the Merger and the other transactions contemplated by this
Agreement. This Agreement contains the entire agreement between the parties. No
representation, inducements, promises or agreements, oral or otherwise, which
are not embodied herein shall be of any force or effect. This Agreement replaces
and supersedes in its entirety the MOU. This Agreement may be executed in
multiple counterparts, each of which shall be an original for all purposes and
all of which shall be, collectively, one agreement. This Agreement may be
executed by facsimile or email signature, which shall be deemed an original
signature for all purposes. This Agreement shall become effective when executed
and delivered by the parties.
[signatures on next page]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Merger as of the date first above written.
PARENT:
MONDIAL VENTURES, INC.
By
-----------------------------
Xxxx Xxxxxx
President
THE COMPANY:
LEGACY ATHLETIC APPAREL, LLC
By
-----------------------------
Xxxxxx Xxxxx
Managing Member
27
EXHIBIT A
DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
Directors
---------
Xxx Xxxxxx
Xxxxxx Xxxxx
Xxxx Xxxxxxxx
Officers
--------
Xxxxxx Xxxxx, Chairman and Chief Executive Officer
Xxx Xxxxxx, Chief Operating Officer and Secretary
Xxxxx Xxxxxxx, Chief Financial Officer
Xxxx Xxxxxxxx, Vice President of Business Development
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Schedule 6.6
Capitalization based on the Issuance of 51,000,000 Shares of Parent Common
Stock and $30,000 of Company Convertible Securities
Post-Closing Common Stock Capitalization
===========================================================================
Shareholders Common Stock Ownership %
------------- -----------
Existing Holders 9,800,000 12.9%
Company Holders 51,000,000 67.1%
Investors / Debt Holders 15,200,000 * 20.0%
Total 76,000,000 100.0%
---------------------------------------------------------------------------
Post-Closing Fully Diluted Stock Capitalization
===========================================================================
Primary
Shareholders Common Stock Ownership %
------------- -----------
Existing Holders 9,800,000 7.9%
Company Holders 51,000,000 41.1%
Investors / Debt Holders 15,200,000 * 12.3%
Subtotals 76,000,000 61.3%
Parent Convertible Debt 10,670,000 ** 8.6%
Reserved for Issuance to Directors 13,330,000 10.8%
Company Convertible Securities 24,000,000 + 19.4%
Total 124,000,000 100.0%
---------------------------------------------------------------------------
* Assumes all indebtedness and obligations of Parent except as provided in
Section 6.7 or 11.1 are satisfied through cancelation or issuance of
Common Stock.
** Assumes Parent Convertible Debt reduced to convert into a maximum of
10,670,000 shares of Parent Common Stock.
+ Assumes Company Convertible Securities are reduced to $30,000.
29
Company Disclosure Schedule
Section 3.6(a) - Company Holders
Xxxxxx Xxxxx - 100% of the membership interests
Section 3.6(b) - Company Convertible Securities
Xxxxxx Xxxxx - $30,000 in principal amount
Section 3.15 - Trademarks and Copyrights of the Company
"Alltimate Ball" (Class 25) - U.S. Trademark Application Serial No.
85089953
The "AB" logo (Class 25) - U.S. Trademark Application Serial No. 85043195
The Company has received email notice from counsel for Aquarius Rag LLC
("Aquarius"), in which counsel contends that the xxxx and design "AB" will
infringe on various Aquarius marks. The Company has reviewed the Aquarius marks;
the Company believes it will prevail in any judicial or administrative review of
the matter. Counsel for Aquarius recently offered a resolution that the Company
is studying. The Company believes that the parties will reach an accommodation
that will result in little or no impact on the Company's rights of use in its
marks.
Section 3.17 - Material Liabilities of the Company
Obligations and liabilities of the Company (including repayment of
advances made for the benefit of the Company therefor) incurred in the ordinary
course of business, including with respect to obtaining athlete rights, creating
samples and in connection with product development.
Obligations and liabilities of the Company under this Agreement.
Obligations and liabilities of the Company for expenses, including
professional fees and costs, incurred in connection with the negotiation and
performance of this Agreement and consummation of the transactions contemplated
by this Agreement.
30
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